Market Watch with Alan Brugler and Austin Schroeder
July 15, 2022
Dog Days of Summer
The dog days of summer are upon us. Looking at the weather maps, the 6-10 and 8-14 day forecasts are calling for above normal temps for much of the US to round out the month. It will likely be a warm one as we head to August. As pollination is upon us, the market’s focus is going to be shifting ever so more to the weather and chances for rain to push the crops along. The crop is yet to be made across the county with the dog days hitting the Corn Belt during an important time of the growing season, a drink will be welcomed. As crazy as the market has been, it’s likely not thrown the towel in just yet on the element of surprise.
Corn futures tripped up after gapping higher out of the gates to start the week and never recovered, with nearby September slipping 4.58% (29 cents) this week. Monday’s Crop Progress report showed condition ratings for corn down 1 point lower on the Brugler500 Index at 363. NASS also showed that 15% of the crop had reached silking stage, 10% below normal. USDA raised their corn production projection on Tuesday by 45 mbu to 14.505 bbu on the larger acreage from the June 30 report. Ending stocks were up a total of 70 mbu to 1.47 bbu. Thursday’s Export Sales report another round of weaker data, showing net sales of just 59,000 MT for the week. New crop sales were 3-week high 348,200 MT. US old crop corn export commitments (shipped plus outstanding sales) are now at 60.416 MMT, 14% below last year at this time. That is 97% of the USDA export forecast, vs. the 102% average. Friday‘s Commitment of Traders report indicated spec funds trimming back another 21,693 contracts from their net long position in the week ending July 12. That took their net long down to 151,174 contracts by Tuesday.
Wheat futures never recovered from the ugly Monday start of gapping higher and closing lower. Chicago was the leader to the downside, losing 12.87% to drop below $8. KC HRW was close behind, down 11.45%. MPLS spring wheat was 8.57% lower on the week. Crop Progress data from Monday showed 44% of the spring wheat headed vs. the 5 year average of 77%. The Brugler500 index was up another 8 points for the week @ 371. Winter wheat harvest had reached 63%, vs. 61% on average. On Tuesday, USDA raised their 22/23 wheat production number by 44 mbu to 1.781 bbu. After revising exports higher, the ending stocks total was up 12 mbu to 639 mbu. Thursday’s Export Sales data showed the largest sale for the current MY since July 2013 at 1.017 MMT. New crop sales totaled 30,000 MT, taking the total sales to 1.04 MMT, the largest since March 2020. Sales commitments YTD are 7.133 MMT, now just down 1% from last year. CFTC showed the managed money spec funds removing another 6,402 contracts from their CBT net long in the week ending 7/12, leaving them net short 6,444 contracts as of Tuesday night. Spec longs in KC trimmed 5,650 contracts from their position that week, bringing it down to 16,387 contracts net long on July 12.
Soybeans held steady from Wednesday to the Friday close, but early week losses were too much, as August was down 3.12% (47 ¼ cents) since last Friday. Product values were lower, with soymeal leaking 30 cents and bean oil down 4.01% (2.51 cents). The NASS crop ratings showed further deterioration, with 62% rated good or excellent, down 1% wk/wk. The overall crop ratings transferred to the Brugler500 rating were unch at 361. Progress continues to lag, with 32% of the crop blooming by last Sunday, vs. the 38% average. The USDA’s updated balance sheet from Tuesday showed a 135 mbu cut to production on the drop in acreage. The 22/23 carryout was cut by 50 to 230 mbu. Weekly soybean export sales expanded off of last week’s MY low to a net reduction of 362,900 MT for old crop delivery. Cancellations/switches include 367,500 out of “unknown destinations” and two vessels to China. New crop export sales for the week totaled a 9-week low 113,900 MT. Export commitments are 101% of the full year forecast (typically 103% on this date). Accumulated shipments YTD are 89% of the WASDE forecast, with the average 90% for this date. In other words, July and August typically account for only 10% of annual US soybean exports. The weekly CFTC report showed the managed money spec funds reducing their net long by 9,337 contracts in the week ending July 12, putting them net long 95,711 on that date.
Live cattle futures bounced 0.73% this week. Cash trade in the south was mostly steady at $137, with the north at $144-145, steady to $4 lower. Feeders were the leaders early in the week, with August up a total of 2.69% ($4.62) since last Friday. The losses in feed costs was helped to rally the feeders. The CME Feeder Cattle Index was $172.62, up $4.23 from the previous week. Wholesale beef prices were mixed this week, widening the Chc/Sel spread another $1.08 to $27.12. Choice boxes were up $1.02 (0.4%) per 100 pounds, while Select was down $0.06 (-0.0%) from Friday to Friday. Weekly beef production was up 14.1% from the previous week because of the holiday, and 3.2% larger than the same week in 2021. Beef production YTD is up 1% on 1.2% larger slaughter. On Tuesday, the WASDE showed a 15 mil lbs increase to US beef production for 2022 to 27.922 billion lbs, mainly in the 4th quarter. The weekly Export Sales report showed a MY low 9,200 MT of beef was sold during the week that ended July 7. The Commitment of Traders report on Friday showed spec funds adding back 3,783 contracts to their net long position in the week ending July 12, dropping it to 18,080 contracts net long.
Lean hog futures settled down this week, with August up just 0.6%, or 65 cents. The CME Lean Hog index was $113.39, up $3.23 from last week. The pork carcass cutout value was up another $7.65 (+6.7%) this week – now at $122.18. Ribs were the again the weakest primal, being the only wk/wk negative at -$12.75 (-7.1%). US weekly pork production was up 13.6% from the previous week due to the holiday, and 0.3% larger vs. the same week in 2021. YTD production is down 3.2% on 3.9% fewer hogs. USDA trimmed their 2022 pork production estimate by 60 million lbs to 27.159 billion on Tuesday. They did, however, raise the 2023 estimate by 155 million lbs to 27.520 billion lbs. FAS reported pork export bookings dropping 42% to 18,300 MT of during the week that ended 7/7. Mexico was the main buyer at 10,100 MT, with Japan at 3,400 MT. The Commitment of Traders report indicated spec funds building back their net long by 11,449 contracts to 39,934 in the week of 7/12.
Cotton futures were down a whopping 7.24% this week, despite rallying the expanded limit higher on Friday. National conditions were up 12 points on the Brugler500 Index rebounding from the lowest reading of the season to 304. TX was a big part of that, up 16 points, with MS 28 points higher. The Crop Progress report also showed 22% of the crop squared, vs. the 18% average. USDA gave us an update to the balance sheets on Tuesday via the monthly WASDE report. They slashed production by 1 million bales to 15.5 million on a larger abandonment. Projected carryout for new crop was down 500,000 bales to 2.4 million bales. The old crop marketing year ends July 31, and old crop export sales are slowing. They were a MY low 10,200 RB in the week of 7/7. New crop bookings backed off to a 5-week low of 139,300 RB. Export shipment accumulations are 85% of the USDA projection vs. the 93% average. The Commitment of Traders report showed managed money spec funds were net long 35,631 cotton futures and options contracts as of July 12, down another 5,055 contracts from the previous week.
Market Watch
Next Monday start the week out with Export Inspections data release in the morning, and the Crop Progress report released that afternoon. The weekly EIA ethanol numbers will be out on Wednesday. Thursday will feature the weekly Export Sales report from USDA’s FAS division. Friday marks the expiration of August grain options. NASS will also release monthly Cattle on Feed and Cold Storage reports and the bi-annual Cattle Inventory report in the afternoon.
Visit our Brugler web site at https://www.bruglermarketing.com or call 402-697-3623 for more information on our consulting and advisory services for farm family enterprises and agribusinesses.
There is a risk of loss in futures and options trading. Similar risks exist for cash commodity producers. Past performance is not necessarily indicative of future results.
Copyright 2022 Brugler Marketing & Management, LLC. All rights reserved.
